Concern about bluetongue drives up dairy prices further

De Dutch milk supply was already 3% below last year's level in July, but this shrinkage percentage could increase further in August. Production declines in statistics can also be expected in other European countries based on reports from the market. The milk supply at the factory gate is very tight, probably as a result of bluetongue that is increasingly advancing. The concerns about this currently outweigh the anti-dumping investigation into China announced this week for European dairy. The possible effects of this may take months to manifest, or so is often the thought. 

All in all, the milk supply is much tighter than dairy producers had taken into account in advance. Companies that are usually active as sellers on the spot market now have to purchase additional volumes to meet their delivery obligations. Purchasing liquid dairy is not an impossible task, but it does come with a hefty price tag.

Cream rises further
DCA's cream quotation already set a record last week and will rise further this week by no less than €500 to €9.485 per tonne. For delivery in the fourth quarter, prices are even above the limit of €10.000 per tonne. Based on the sky-high butter prices, it is possible, but it is expensive. It is difficult to estimate whether the price recovery will continue. There is a lot of upward momentum in the market at the moment, but in the generally erratic fat market, the ball can simply roll in the other direction. However, major price drops are not expected based on the tight milk supply and butter stocks. However, there are sometimes suspicions that stocks are being held by traders for speculative purposes.

Spot milk prices are also rising further, in the Netherlands by €2 to €54 per 100 kilos. This means they are further ahead of the payment prices that dairy farmers receive. It also outlines the direction that payment prices may take, provided the dairy market remains intact. Based on current dairy prices, the raw material value of milk is sometimes above €60 per 100 kilos, according to the valorization tool from DCA Market Intelligence.   

Milk concentrate is taking significant steps
The fat side of the dairy market was already intact bullish, but the protein side is also slowly but surely gaining steam. This is reflected in rising prices for milk and whey powder, although inventories in those markets are still significant. In the liquid protein segment, skimmed milk concentrate also made a big step up this week, from €160 to €2.305 per tonne. This is the highest level since last autumn. The increase has suddenly made milk concentrate too expensive for powder manufacturers to dry, but the product enjoys a lot of support from the fresh segment.